Michael Fabricant: Of course, it has to be said that some football clubs are registered as companies on the stock exchange and they could come within the ambit of the regulations. Although footballers are unlikely to be club directors, highly-paid managers often are, so I wonder whether football clubs will have to produce similar reports. The Minister seems to be nodding, so I assume that they will, if they are quoted on the stock exchange or Nasdaq.

Mr. Waterson: I am grateful to my hon. Friend, because the term ''company director'' covers a multitude of different skills and experience. I vividly recall, as a young barrister, defending a gentleman on a charge of armed robbery. While helping him to fill out his legal aid forms in his cell, I asked him to write down his occupation. He wrote ''company director'', but he contrived to make a spelling mistake in both words. To this day, I have no idea what kind of company he was a director of, but he is very large, so I have no intention of arguing with him.

On delays, executive pay may have been one issue that helped to sweep new Labour to power in 1997?things could only get better then, but how long ago that seems. However, only in July 1999, the Government built on existing codes by issuing a consultation document on further changes to executive pay. They commissioned PricewaterhouseCoopers?I do not know why it was not Arthur Andersen on that occasion?to examine compliance with existing requirements.

Things went quiet for a bit, until 7 March 2001, when the then Secretary of State announced that there would be new disclosure requirements for directors, and a press release, of course, went out. Things again went a bit quiet, until October 2001, when the current Secretary of State announced the requirement that the

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remuneration report should be subject to a shareholder vote each year.

Interestingly, that was not a new proposal, and the Cadbury committee?the mother and father of all recent corporate governance studies?had rejected it as ''unworkable'' in 1992. The Greenbury committee took a similar view, and in 1998 Hampel said:

''Greenbury recommended that the remuneration committee's report to shareholders should not be a standard item of agenda for AGMs; but that a view should be taken each year whether the AGM should be invited to approve the remuneration policy. We agree that the decision whether to seek shareholder approval for the remuneration report should be one for the company. To require shareholder approval for a single aspect of company policy would, in our view, be inappropriate. A shareholder sufficiently unhappy with the remuneration report ultimately has the opportunity to vote against the whole of the report and accounts.''

I have said already that such a facility exists, and shareholders have not been slow to use it. Indeed, they have done so increasingly in recent times.

The Library report states:

''The Government's proposals are for a vote that is not binding on directors.''

The Minister made the same point in different words, when she said that the vote will give shareholders an opportunity to show their concern. She went a little further, but that was her main thrust. We agree that that arrangement is fine, save that shareholders already have plenty of opportunities to show their concern.

The Minister also rightly commented on retrospectivity. The reason why the vote can make no legal difference is that the agreements are already set in concrete. On any opportunity to overturn those agreements, I shall paraphrase her, although I hope that I am not doing her an injustice?

Miss Johnson: Almost certainly.

Mr. Waterson: The Minister is welcome to correct me anytime, but I think that her point was that directors will have legal redress if the general meeting throws out individual packages. That is why the vote will have no legal meaning and why the package must be voted on for all the directors, not individuals.

Miss Johnson: The hon. Gentleman has it fixed in his mind that two different issues are being tackled. One is historical remuneration, which cannot be changed because the company has contractual obligations. The other is future remuneration policy, which will be covered in the report. That policy looks ahead and much about it can change.

Mr. Waterson: I assure the Minister that I am well aware of that, and I hope to deal with the issue if time allows. I appreciate that perhaps the only genuinely novel aspect of the regulations is the idea of a future remuneration policy. It would be interesting to know how many of those listed companies already have a report of some sort dealing with their future policy.

Michael Fabricant: The Minister made a timely intervention to point out, as she did earlier, that there are two aspects to the report, one retrospective and the other dealing with future policy, but does my hon. Friend agree that directors, especially those with particular skills, are likely to be put on long-term

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contracts and that such contracts are likely to apply for many years hence, unless there are to be major changes to the phalanx of directors? Because of those contractual arrangements, neither the retrospective aspect of the report nor that dealing with future policy will apply to them. Secondly?

The Chairman: Order. There is not going to be a secondly.

Mr. Waterson: I am interested in my hon. Friend's remarks, although I am not sure that the contracts that we are talking about will be of such duration. Non-executive directors tend to rotate on a three-yearly cycle, but I again bow to those with greater direct experience.

Miss Johnson: Perhaps I can help both hon. Gentlemen. The combined code recommends a one-year contract and the majority of directors are on such contracts.

Mr. Waterson: That does not affect my hon. Friend's central point, which the Minister has agreed to, that the vote on the remuneration package or packages is entirely historic and cannot change anything. The vote on the future remuneration policy could have an affect on future developments but is equally not binding in any legal sense on the directors.

Miss Johnson: I am not clear; perhaps the hon. Gentleman can help me. How does he think anything can change past remuneration policies? I would like to be clear, because the hon. Gentleman is implying that we are not doing something that we should be doing about past remuneration. What exactly does he suggest the Government might do on that score?

Mr. Waterson: They might stop spinning the measure?

Miss Johnson: That is not an answer.

Mr. Waterson: It will be when I get to the end of it, if the Minister will allow me. The Government have been spinning this since long before they actually did something about it. The idea has obviously been at the back of some dusty cupboard at the DTI, and suddenly, in a great rush because of the approaching summer recess, after three years it has been dusted off?along with a lot of other things, which I do not want to go into.

However, the reality is that this will not give an iota of additional power to shareholders. It will not do anything more to encourage or assist shareholder activism than the current arrangements. As long as we can agree that, we can make some progress.

Miss Johnson: We really cannot agree that.

Mr. Waterson: Then let us move on to see whether we can find something that we can agree on.

At the risk of provoking the Minister, we all accept, because it is self-evident, that one cannot reopen the packages that have already been agreed and to which the directors have a legal entitlement. Under the regulations, the shareholders can have a moan about those and they can press that moan to a vote, rather as we often do in this Committee. However, it will not

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make a jot of difference, rather as happens in this sort of Committee when the governing party has a large parliamentary majority. There is nothing to disagree about, except the Government's presentation of the measures, which is perhaps beyond the scope of the debate.

A couple of sentences from the Library briefing are particularly penetrating and follow on from what I said earlier. It states:

''One issue which may be raised when the Regulations are debated''?

indeed, I have raised it?

''is the slow pace with which the legislation has been brought forward.''

It goes on to state:

''much of what they''?

the proposals?

''require is already required by the Listing Rules.''

Again, that is self-evident.

Let us move on to the comments of outside organisations on the proposals. It will come as no surprise to the Committee that John Monks of the Trades Union Congress has welcomed the proposals. He says:

''Forcing companies to hold separate votes on remuneration packages at AGMs is a very welcome move. Executives will now need to justify their pay rises . . . Companies that include employees on their remuneration committees, as the TUC suggests, are likely to get an easier ride at AGMs''.

It is clear, therefore, that the unions have their own agenda, but that is not covered in the regulations. What is sauce for the goose is sauce for the gander. One wonders whether there should be similar regulations about the packages of remuneration for trade union leaders. Do the Government have any plans on that?

I shall move rapidly on. The National Association of Pension Funds, which represents many British companies that have substantial shareholders through their pension funds, has said:

''Well structured and forward looking remuneration committee reports should provide shareholders with a sound basis to form a judgement on whether a company's board has adopted a policy that will assist them in promoting long term growth''.

''Although the proposals relate to the annual reporting of remuneration policies and packages, it is important that the process starts well before the AGM and is part of a continuous dialogue with shareholders''.

That ties in rather neatly with an intervention made by my hon. Friend the Member for Bognor Regis and Littlehampton. He pointed out that when we are prescriptive about such matters, there is a danger?I do not want to overstate it; in theory, one could say it about any regulations?that people get into box-ticking mode. What we need is a company that will

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engage with its shareholders and their concerns on a year-round basis. That is what the Institute of Directors said, and I agree. There must not be some great climactic row once a year at the general meeting, a row that leads nowhere, for the reasons I touched on.

More so than many such documents, the explanatory memorandum is helpful on some points, and I want to touch on a couple of them. In the rather neutral language that we expect from an explanatory memorandum, it supports our view that the regulations are largely symbolic. We are not giving anyone new legal powers or obligations. The memorandum states that

'the regulations have the effect of translating the Listing Rules disclosures into legislation.''

That is the explanation in a nutshell. I could almost rely entirely on the memorandum to make my point. As it is a requirement of listing that one fulfils the listing rules, we are simply turning what already exists into legislation.

The explanatory memorandum is more contentious in mentioning conflicts of interest when executive directors decide their own remuneration. Companies now tend to have remuneration committees of non-executive directors to decide such matters. Does the Minister have statistics on those at her fingertips? I suspect that the vast majority of listed companies have such procedures.

The memorandum states:

''In the Government's view, the requirements in the Listing Rules mean that there is an acceptable level of transparency in respect of the disclosure of individual directors' packages.''

Before the Minister leaps to her feet, I shall pause without going on to make the point that the memorandum makes on the Government's behalf. The issue is not about transparency. The current rules, as they apply to listed companies, require transparency as to packages, and the regulations will make no difference to that. We already know that the regulations will make no difference to the ability to reopen those packages, and we all agree with the reasons for that.

The same paragraph of the memorandum makes the point that the Government do not hold the view

''that there has been adequate compliance with the Greenbury recommendations on the disclosure of . . . policy: this includes the rationale for, and the main parameters of, share option or other long-term incentive schemes''.

Our welcome for the regulations is generally friendly but slightly lukewarm, because they will make so little difference in practice. However, the Minister has a point in that a debate on the future policy is an important innovation in itself, if not the headline that the Government would seek.